All posts tagged Financial Crisis Inquiry Commission

The Securities and Exchange Commission’s probe into Fannie Mae and Freddie Mac appears to be hinging on a simple question: What’s the definition of a subprime mortgage?

The SEC is investigating whether the mortgage titans’ disclosures to investors of subprime and other risky mortgages may have misled investors about their decisions to take on more risk. So far, four current or former officials of the companies have acknowledged that they could face civil charges from the SEC, including Daniel Mudd and Richard Syron, the former chief executives of Fannie Mae and Freddie Mac, respectively.

The trick in this case is that there never was an agreed upon definition of a “subprime” mortgage. Fannie and Freddie got into even more trouble by buying up lots of Alt-A mortgages, which is even harder to define but generally consisted of loans between prime and subprime where borrowers didn’t have to document their incomes.

So what are some of the potential definitions of subprime? Read More »